UK Budget a 'difficult day' for oil and gas sector amid changes to windfall tax

The contents of the budget means it is a ‘difficult day’ for the oil and gas sector, according to an industry body.

The Chancellor announced there would be changes to the windfall tax starting Friday.

The Energy Profits Levy on oil firms will increase by 3% to 38%, meaning overall taxation on upstream oil and gas activity will be taxed at 78%.

Rachel Reeves also confirmed that the levy would be extended until the end of March 2030, but did say it would then come to an end.

Offshore Energies UK chief executive David Whitehouse said: “Today we heard the Chancellor recognise the role of the oil and gas sector to support high-quality jobs and strengthen the UK’s energy security.

“We welcome that and the meetings and dialogue which have taken place between industry and the new government.

“However, with an increase in tax despite commodity prices at recent lows, there is no hiding that this is a difficult day for the sector.”

The industry has warned of the damage that would be done if Labour pushed ahead with its plans.

Last week, it was reported that Harbour Energy is looking to sell its stake in a number of North Sea assets because of the changing tax in the UK.

The firm said it wouldn’t comment on speculation.

However, environmental groups welcomed the plans to increase and extend the tax, saying more must be done to help pay for the transition and struggling households.

However, there was a small win for the sector.

They had campaigned to keep some of the allowances contained within the windfall tax.

The UK Government said that the 29% Investment Allowance would be axed but that two other allowances would remain.

It said that would ‘provide certainty’ and ‘support a stable energy transition’.

The Government also announced that it will publish a consultation early next year on how tax on oil and gas profits ‘will respond to price shocks’ after the Energy Profits Levy comes to an end.